Breaking Loose

Some graphs speak for themselves. 

This one tells the story of Blockbuster Video and its demise. The company’s sad end is a case study in how big beasts can be brought low by interrupters — and that within a very short period of time. Netflix entered the market more than ten years after Blockbuster was founded. In 1997, the video rental chain operated almost 4,000 stores in the United States alone. The bitter irony is that just three years before its peak, Blockbuster turned down the opportunity to acquire Netflix for $50 million.

By that time, it was already too late as is obvious now. Netflix had been offering DVD-by-mail rentals since 1998. Blockbuster waited until 2004 and never caught up. Netflix inflicted a mortal wound in 2007 when it introduced streaming services. What had turned to a steady decline for Blockbuster starting in 2006 turned into a bloodbath from 2009 onwards. The company declared bankruptcy in 2010. Four years later, the new owners Dish Network Corp. closed the last company store. As of 2016, all of 14 franchised stores remain open worldwide. That is down from a peak of about 9,000 global locations.

Over the same 2009 to 2015 period, the average hour a Netflix subscriber spends watching the company’s content increased from 15 minutes to almost 2 hours. Worldwide streaming usage hours rose from about 1 billion to over 40 billion.

Size, brand name and market experience don’t count for much if you fail to notice crucial trends.

Sources:

• FRANdata
• The Economist
• Bloomberg